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Banking & Finance

Japan majors boosting presence in Asia

TOKYO -- Japanese megabanks are boosting their mergers and acquisitions to expand their presence all over Asia.

     Bank of Tokyo-Mitsubishi UFJ recently decided to invest in a Philippine bank in a bid to secure a foothold in the country, as it did in Thailand by acquiring a major Thai commercial bank.

     Sumitomo Mitsui Banking Corp. is eyeing a hike in its stake in a bank in Indonesia, a primary market for its business expansion strategy.

     Although there are concerns about a possible slowdown in the Asian economy, top Japanese banks are seeking new opportunities for M&As.

     "The more markets crumble, the more chances for acquisition become available," an executive of a major Japanese bank said following BTMU's announcement Jan. 14 of its decision to acquire a major stake in Security Bank of the Philippines for nearly 100 billion yen ($851.86 million) despite an unfavorable business environment. Having lower Asian stock prices and falls in the value of currencies in the region in mind, the executive's statement reflects the rival bank's surprise as well as its appreciation of BTMU's move.

     With the investment in the Philippine bank, BTMU will seek to promote services for individuals and small businesses in the country.

     While Japanese banks do business with big companies in Asian countries through their local branches, they find shortcuts in tie-ups with local banks to expand retail banking services as they can tap the partners' branch networks and customer bases.

     BTMU has already engaged in retail banking services in Thailand via Bank of Ayudhya, which it acquired in 2013. It is set to promote them in the Philippines, where the number of middle-income people is increasing.

     SMBC is also seeking to expand its retail banking services in Asia. In Indonesia, the bank has acquired a 40% stake in Bank Tabungan Pensiunan Nasional and launched services for individuals, such as remittances via mobile phone. While the 40% stake is the cap under Indonesia's bank ownership rules, SMBC President Takeshi Kunibe said, "The restriction may be eased in the future, creating opportunities to acquire a majority stake."

     In 2015, SMBC made Acleda Bank, the biggest bank in Cambodia, into an equity-valued affiliate through additional investment in a bid to secure a strong foothold in the country, which is a relatively small member of the Association of Southeast Asian Nations but is expected to achieve rapid economic growth.

     In Vietnam, which is drawing strong international attention to its high growth potential, Japan's three megabanks, which also include Mizuho Bank, have invested in local banks and are stepping up competition.

     Japanese banks remain willing to promote market advances into Asia, hoping to capitalize on the establishment of the ASEAN Economic Community and the expected implementation of the Trans-Pacific Partnership trade liberalization accord.

     But concerns remain that the Asian economy will continue to flag as a result of China's prolonged economic slowdown, while geopolitical risks, such as recent terrorism in Indonesia, are rising in Asia.

     In addition, M&As do not necessary generate easy rewards. For example, Sumitomo Mitsui Financial Group, the parent of SMBC, logged an asset impairment loss of 55 billion yen after a sharp fall in the stock price of BTPN.

     Japanese banks are being tested more strictly than before in their ability to spot business opportunities and prevail amid the challenges of Asian markets.

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